PUBLIC GOODS, RENT DISSIPATION, AND CANDIDATE COMPETITION*

In: Economics & politics, Band 2, Heft 2, S. 115-132

Abstract

The early literature on rent seeking presumed that total expenditures in the rent‐seeking process would equal the value of a contested prize. Subsequent analysis has shown, however, that a number of circumstances give rise to underdissipation of the contested rent—imperfectly discriminating contests, risk‐aversion, or where individuals' valuations of the prize are not identical. This paper shows how underdissipation is associated with the public‐good character of contested rents. In particular, total rent dissipation is demonstrated to be less than the average stake of the individual contenders. In addition to assessing rent dissipation in contests for public‐good allocations, the paper also endogenizes the value of the prize by placing the rent‐seeking contest in a setting of candidate competition.